460 of 508 people found the following review helpful
on May 28, 2009
Let me preface this review by saying that I am a fan of Collins' earlier work. Built to Last was a great book, and Good to Great was very good. How the Mighty Fall, however, is neither. The issue of corporate failure is critical, particularly in the current downturn. Unfortunately, the core of Collins' analysis in this book is flawed.
How the Mighty Fall addresses two related questions: Why do good companies fail? and how does management respond once a company gets into trouble? Collins introduces a five stage model to answer these questions, where steps one and two address the roots of corporate failure and steps three through five managements' response.
Collins' analysis of management response to decline--denial of risk, grasping for salvation, and capitulation to irrelevance or death--accurately describe how leaders respond to deterioration in their business. This analysis here is solid, the writing clear, and the tempo brisk. Collins does a particularly good job of describing dysfunctional leadership behaviors of companies is in decline.
Collins' analysis of why companies get into trouble in the first place is much less compelling. Companies fail, according to Collins, when success breeds managerial hubris, which leads to overreach and ultimately failure. Like many of Collins' findings, this makes intuitive sense. Unfortunately in this case, his core argument runs counter to research on hundreds of companies, conducted over decades by dozens of scholars. There are two major flaws in Collins argument.
First, he claims that companies get into trouble because they overreach and expand beyond their core. This is consistent with data showing that diversified companies trade at a discount to focused rivals. Recent research published in the Journal of Financial Economics and the Journal of Finance has established that the companies often diversify to escape decline in their core business. Overreach is a symptom--not a cause--of decline and thus cannot explain its roots.
Second, Collins ignores a rich body of research that finds decline sets in not because companies stray from their core, but because they stick too close to it. Clay Christensen's research on disruptive technology, for example, demonstrates that companies stumble when they stay too close to their established customers and fail to serve emerging segments. The competency trap literature finds that companies get locked in by what they do well and struggle to adapt when circumstances change. Hubris and overreach, of course, play a role in corporate decline, but a well-established body of research suggests that they are rarely the root causes.
How did Collins, who does many things right in his research, get his core finding so wrong in this case? As always he tackles a big and important question, and his pairing of comparable companies is a sensible research design. His failure to read or acknowledge a rich body of previous research that bears directly on his research question, in this case, has led him to rather facile observations. In research, as in business, a lack of humility in recognizing the contributions of others can lead to overreach.
82 of 96 people found the following review helpful
on May 29, 2009
One thing that strikes me about Jim Collins' work is that he is passionate about what he does. He and his researchers dig down deep into companies and examine them from different perspectives over a period of time. As he says, "We do not decide which companies we 'want' to study... we lay out the criteria for the study-set selection before we see the data and systematically eliminate companies from consideration based on whether they meet the criteria." This has given him great insight into what success is, not just for corporations, but for any institution.
What comes through in his recent book, along with passionate study, is honesty. Collins previously chose Fannie Mae as a "Good to Great" institution. Recently, they have demonstrated anything but greatness in facing economic and marketplace changes. There are other companies he chose, like Circuit City, that have gone the same path. Collins discusses why these enterprises were chosen in his previous book and why they fell on hard times after once being great. Because a great company stumbles into mediocrity does not mean the criteria is flawed or the framework wrong. Rather, as the study shows, somewhere along the way these companies strayed away from what once made them great. "How the Mighty Fall" uses the same criteria from "Good to Great," only in reverse, to show how and why once great enterprises have fallen. Collins does this with the same attention to detail and passion as in his previous works.
There are a couple of parts that I found most interesting from the book. First is the chapter entitled "The Undisciplined Pursuit of More." The examples of Ames and Rubbermaid, along with the other ideas presented in this chapter, really hit home in light of recent developments in our financial markets. The second part is appendix 6 where he gives brief case studies on IBM, Nucor and Nordstrom using the "Good to Great" framework to demonstrate how they went from struggling companies back to greatness. I recommend this book to anyone who is interested in an honest assessment of either business success or success principles in general.
24 of 27 people found the following review helpful
"Come, let us build ourselves a city, and a tower whose top is in the heavens; let us make a name for ourselves, lest we be scattered abroad over the face of the whole earth." -- Genesis 11:4
How the Mighty Fall takes a methodology similar to Built to Last and Good to Great and searches for differences among paired companies (Loser--Winner; A&P--Kroger; Addressograph--Pitney Bowes; Ames--Wal-Mart; Bank of America--Wells Fargo; Circuit City--Best Buy; Hewlett Packard--IBM; Merck--Johnson & Johnson; Motorola--Texas Instruments; Rubbermaid--None qualified; Scott Paper--Kimberly-Clark; and Zenith--Motorola) As you can see, it all makes for strange bedfellows (Motorola is on both sides of the divide and Rubbermaid doesn't have a winning comparison partner). As before, the analysis relies on public information from that period (such as annual reports, business journalism articles, and analyst reports).
From these data, Jim Collins discerns the following taxonomy of stages:
1. Hubris (excess pride) due to prior success
2. Undisciplined pursuit of more
3. Denial of risk and peril
4. Grasping for salvation
5. Capitulation to irrelevance or death
Reaching any one of these stages doesn't mean that stage 5 is inevitable in Collins' view.
The result is more like a monograph than a full business book with limited examples and observations. Many readers will find themselves hungering for more.
I was grateful to Mr. Collins for the excellent way that he defined and described his cases. As a result, I was able to look into what he was measuring to see what else might be there.
I had the good fortune to work with most of these companies as a consultant either just before or during the measurement period. As a result, I was able to think about what people inside the company had told me at the time about what they were doing and why they were doing it as well as what I observed about how they went about doing their work.
From those additional perspectives, I thought there were some other lessons:
1. Capable continual business model innovators (Kroger, Pitney Bowes, Wal-Mart, Wells Fargo, Best Buy, IBM, TI, and J & J) outperform those who mostly try to make old business models more efficient and effective.
2. Companies are more likely to try to do too much and swerve off in weird directions because the CEO feels insecure (Addressograph, Ames, Bank of America, Merck, Motorola, Scott, and Zenith) compared to a predecessor and the predecessor's track record (or a competitor CEO and that CEO's track record) rather than because of excess pride.
3. Denial of risk and peril arrives long before the company's performance peaks (Addressograph, Ames, Bank of America, Circuit City, Motorola, Scott, and Zenith). It just shows up as a problem later after a change in the environment causes the company to be exposed to worse results because of risk than before.
4. Ignorance about how to do big acquisitions successfully is rampant in large organizations (Ames, Hewlett Packard, Merck, and Motorola). Do a difficult large acquisition without understanding how to succeed, and you will probably fall flat on your face. Your stock will fall flatter than a pancake.
5. Pursuit of seemingly higher-growth markets is an irresistible lure for the portfolio-strategy-focused CEO (these names shall remain unidentified, but they know who they are) regardless of the real opportunity (think of the AOL-Time Warner merger).
This subject, I think, would be much better studied as a methodology by long-term tracking studies that include annual interviews and visits with a large number of competitors, customers, suppliers, and employees among the comparison companies. Perhaps someone from academia will move beyond the desire to write a quick case and do this kind of fundamental research to help answer the question: "How can we know when we are headed for a fall?"
50 of 60 people found the following review helpful
on June 4, 2009
I am a huge Jim Collins fan. I really believe that Good to Great helped my company in many different ways. This book had some great information in it, but it could have been done in an article in a magazine. There is just not enough substance to fill an entire book. What is there is really important, but not much of it. In fact it seems like half of the book is appendix. I guess after Good to Great I expected more.
11 of 14 people found the following review helpful
Not too bad a book. But... has a sort of hurried feel to it. Too thin, and the style is too reminiscent of "Good To Great", but without the details of the former. Almost like a movie trailer trying to pass as the movie itself. 120 pages of content, and 100+ pages of appendices and notes and index. Come on... this is just not done, Mr Collins, and certainly not expected from someone like you.
There is a great opportunity for making this book truly great when Collins quotes Tolstoy's novel Anna Karenina.
__"All happy families are alike; each unhappy family is unhappy in its own way." ... I've concluded that there are more ways to fall than to become great. [page 19]
But that's pretty much the start and end of any attempt to move the book from mediocrity to good, let alone great.
According to Collins, companies that fail tend to follow five stages of decline. Companies can fall one or more levels and still recover, but many keep sliding from one level to another, their descent punctuated only by frantic efforts at reorganization, rapid-fire change in leadership, random changes in the business model, brutal layoffs, and more.
The five stages are:
Stage 1 - Hubris Born of Success.
Stage 2 - Undisciplined Pursuit of More.
Stage 3 - Denial of Risk and Peril.
Stage 4 - Grasping for Salvation.
Stage 5 - Capitulation to Irrelevance or Death.
Companies can seem to be in rise even as they go through stages 1, 2, and 3. Decline visible to world, seems to occur only at stage 4, at which point most companies will inevitably slide down further and further. The book's first half is all about these five stages.That is all of 124 pages or so. Yes. 124 pages of large type on paper size that is smaller than most paperbacks. The next 90 pages are notes and appendices for each section. 29 pages of notes, the rest are appendices. So, if you skip the references and notes and all, as most people do, you could be done reading the book before you are halfway on a flight from Seattle to San Jose.
__"Packard's Law states that no company can consistently grow revenues faster than its ability to get enough of the right people to implement that growth and still become a great company. ... (We named this law after David Packard, cofounder of HP, inspired by his insight that a great company is more likely to die of indigestion from too much opportunity than stavation from too little.) "[page 55]
This book needed to have covered new ground, or in a different way, or should have insights that would have been illuminating. It is none. Some of the material, especially on people and bureaucracies, is indeed timeless, and useful, but he has covered that to some extent in Good to Great: Why Some Companies Make the Leap... and Others Don't. If you have not read that book, then this book is useful enough. When comparing or contrasting two firms that went to a particular stage, and one recovered and the other did not, you don't really get any insight. The example of TI and Motorola is one. Or that of IBM and HP. HP seemed to have gone down the tube under the leadership of Carly Fiorina, but has been on the mend with its new CEO, Mark Hurd. Was the acquisition of Compaq all that big a failure as is made out to be? What was it that HP did to come back from the brink? TI does not seem to be doing too well these days. The leadership is the same. What changed?
Collins does seem to recognize the impreciseness of such studies though.
__"If we could conduct double-blind, prospective, randomized, placebo-controlled trials, we would be able to create a predictive model of corporate performance. But such experiments simply do not exist in the real world of management, and therefore it's impossible to claim cause and effect with 100-percent certainty." [page 17]
Collins has written a lot about the importance of people in organizations. And this book is no different. People can and do make or break companies.
__"You break Packard's Law and begin to fill key seats with the wrong people; to compensate for the wrong people's inadequacies, you institute bureaucratic procedures; this, in turn, drives away the right people (because they chafe under the bureaucracy or cannot tolerate working with less competent people or both); this then invites more bureaucracy to compensate for having more of the wrong people, which then drives away more of the right people; and a culture of bureaucratic mediocrity gradually replaces a culture of disciplined excellence. When bureaucratic rules erode an ethic of freedom and responsibility within a framework of core values and demanding standards, you've become infected with the disease of mediocrity." [page 56]
Perhaps the answer to the question as to why this book has such a hurried feel, and why it feels so 'lightweight', even for a pulp-management title, lies on page 118, where Collins writes:
"While working on How the Might Fall, my colleague Morten Hansen and I have been simultaneously working on a six-year research project to study companies that grew from vulnerability to greatness..." [page 118]
13 of 17 people found the following review helpful
Jim Collins has already written some of the seminal works on business strategy and management with Built to Last and Good to Great. While those books are great, How the Mighty Fall a short eclipses them in my opinion, its stated as a focused side project and it stays just that focused at about the right length and tone.
My recommendation is simple: get this book, read it, reflect on it and see where you stand. This is an example of what a five-star business book should be.
Why? Well the answer is simple, its well researched, clearly written, devoid of significant pontification and provides advice that everyone can use. While these factors were present in Collins other works, they were not so to this degree.
Here is what I mean.
Good to Great provides the characteristics of great companies in terms of some simple to remember characteristics, for example, level 5 leadership. These characteristics in good to great described what executives aspired to become. That aspiration is born out of executive desire to be successful. That led to many people seeing themselves as having these characteristics when clearly they did not. When Good to Great came out I cannot tell you how many executives I met with you said that they were or aspired to be level 5 leaders when the best they could manage was 1 and 3/4s. We all want to see ourselves as successful and that undermined the applicability of the Good to Great ideas.
Not this book. How they Mighty Fall clearly describe five stages of enterprise failure and distress. Because no one wants to be them, the guidance these stages provide create an environment for real discussion about the company rather than self-reflective revisionism on how we are great. That clarity, which supports the Good to Great principle of "Confront the Brutal Facts," is what sets this book apart. It should a design principle for Collins current project on managing in turbulence.
The five stages all describe the antithesis of the Good to Great concepts, which is ok, but the book is more than just inverting good to great - it looks beyond that.
Stage 1: Hubris born of success - describing the cultural tipping point when hard work and focus to earn the business turns into a sense of entitlement to future success. This is the death of Level 5 Leadership.
Stage 2: Undisciplined pursuit of more - building from stage one is people chasing goals that take them away from their core, their competitive advantage all in the name of growth, or the grand strategy. This leads to thinking what before you think about who and abandoning the hedgehog concept in favor the rabbit's pursuit of quick gains.
Stage 3: Denial of risk and peril - now that you are chasing things that are not part of your core, you fail to see the problems or blame the problems on the outside world. In this stage you are blind to the brutal facts.
Stage 4: Grasping for salvation - often in the form of the silver bullet, visionary leader all of which keep your attention away from the core (Flywheel) and lead you into further decline. I lose a culture of discipline, abandong the flywheel and chase things outside the core.
Stage 5: Capitulation to irrelevance or death - the final demise when people throw in the towel and the cause is lost. This is the terminus of the lifecycle and the one place you cannot recover from.
Rather than re-write the book here are what I see as strengths and challenges
Well researched and more importantly Collins makes key elements of the research process, scoring models and approaches visible to the reader. This is a piece of work that says see what I did so you can have confidence in the results - a true example of a well-done book.
Case studies that go beyond those done in Good to Great and Built to Last. This broadens the range of examples, a good thing. But there are still a number of repeats here.
Clear writing, the book is focused neat and trim. Sure its short, the book is physically small and the core text is only 123 pages, but each page is loaded with content. I read the book on two 90-minute airplane flights and will come back to it time after time.
Clearly structured and summarized information, which makes the book very usable. This is seen in the way Collins uses tables - sparingly but when needed and other summarization techniques.
Descriptive without being prescriptive, which is a strength, but people looking for recipes to avoid failure - ala silver bullets - will not find them and for good reason - chasing them is a characteristic of stage 4. But some people will see this as a weakness. People who reflect on the book's principles will come up with more than enough things to take action.
Repeats some of the prior books concepts and precepts. This makes it seem a little repetitive in places and can lead the reader to think that this book is just the photographic/cognitive negative of Good to Great.
Takes the easy road in a couple of places use well-worn examples - IBM, the Challenger, among others where deeper or new analysis would be helpful.
Overall the best book so far for 2009 - it is well worth the read, the time and spreading the news.
2 of 2 people found the following review helpful
on October 2, 2010
There are many books and articles that focus on the success of one corporation verses the others that fail. There are those experts who offer direction and guidance to new business leaders on how to be the greatest in their industry. More often than not, the question facing all CEO's and other c-suite executives is, "How can we be the best at what we do? And how do we know what we do best?" Best selling author, Jim Collins addressed these questions, among others, in his books Good to Great and Built to Last. Though in his newest book, How the Mighty Fall: and Why Some Companies Never Give In, Collins evaluates eleven companies to determine what brought some organizations to failure while others, given similar circumstances, were able to succeed.
Collins addresses the question of why companies in great positions fail after studying the contrast between success and failure. After evaluating various companies that suffered through difficult times and went from great to failing, Collins learned that there is a process of decline that others should avoid. Through his research, he discovered Five Stages of decline that offer insight into how a company can avoid, or dig itself out of, a challenging situation. These five stages are:
1) Hubris Born of Success
2) Undisciplined Pursuit of More
3) Denial of Risk and Peril
4) Grasping for Salvation
5) Capitulation to Irrelevance or Death
Collins has established these five Stages on the analysis of only eleven companies which some critics have found to be too little to compile such a finalized format for failure. It is easy to reflect on the history of failed corporations and make assumptions based on certain behaviors. Though regardless of the number of companies studied, the economy is in a state of turmoil and ways of doing business should focus more on how to avoid this crisis in the future. Much of this turmoil, as Collins points out, is due to the arrogance in the financial sector. Perhaps the recognition of these Stages could have assisted in the rebuilding of the organizations before entering Stage Five. Society watched companies such as Lehman Brothers thrive and quickly fall. Should we be so naïve to think that this fall did not start with the hubris that comes with power? Collins addresses very specific characteristics that come with being a success, the challenge lies within being humble and true to the core culture or "hedgehog" as he addressed in Good to Great. Business leaders from the top to bottom should be weary of the steps that are taken to avoid facing such blunder in the end. Awareness and knowledge is the key to business leaders thriving as a leader and as a corporation.
2 of 2 people found the following review helpful
on September 19, 2010
In How the Mighty Fall, Jim Collins compares similar companies during similar time periods facing similar adversity. The companies that succeed are humble, diligent, methodical and assured. The companies that fail are arrogant, growth-obsessed, panicky and unfocused. (Taken from [...])
You could get the impression from Collins' writing that he is a moralist. He cites that the problems with failing companies stem from a lack of humility, self-discipline and eventually, a savior. Yet, Collins' deity in this book is not the Divine, rather it is data. He doesn't isogete the current economic and political situation by starting with conclusions, then backing them up with data. He starts with a question: "Is America renewing its greatness, or is America dangerously on the cusp of falling from great to good?" The data, then, speaks for itself.
The casual assumption would be that in tough economic times every company is suffering. And, to some degree they are. The reality is that while some companies utterly fail in bad times, others move forward with focus and resolve. Similar companies in similar industries in similar tough times should receive similar results. But, that is not the case.
Collins recognizes five stages of decline from his research: (1) Hubris born of success, (2) Undisciplined Pursuit of More, (3) Denial of Risk and Peril, (4) Grasping for Salvation, and (5) Capitulation to Irrelevance or Death. Most professionals as well as consumers knew that Zenith had peaked long ago. Their failure was no surprise. But, Motorola? Motorola had invented themselves into new industry after new industry. They had moved from Good to Great. How could they slide from Great to Grasping?
While Collins will give you the complete data, let me summarize the stages:
Stage One: A lack of humility caused by refusing to count your blessings. This lack of gratitude makes the successful regard themselves more highly than the ought.
Stage Two: Discipline is the hedgehog concept from Good to Great. Being the best at what you do. Keeping the focus crystal clear. Lack of discipline increases the waist line and shrinks the bottom line. More is not better. Better is better.
Stage Three: Denial of Risk and Peril commonly appears as "This will never happen to us. We will never fail." Activity is mistaken for effectiveness. Cash flow is mistaken for profits. Size is correlated with greatness. Whether you study the Roman Empire or Motorola's Iridium, the might do, indeed, fall. Denial of this peril only accelerates the descent.
Stage Four: Grasping for Salvation - Who is the new renegade CEO who will charge in and save us? What is the new product that will catapult us back into success? Many of these external "saviors" have only turned into martyrs in the end. While Collins notes that it's not impossible to recover at this stage, the reality is that no industry possesses or ever will possess a silver bullet that will deliver them to success.
Stage Five: Irrelevance and death are the end result of prideful, undisciplined leadership. The only good news is that start ups will come along to capitalize on the opportunities that these Stage Five companies missed.
This book merits you and your organization conducting an Autopsy without Blame. How has your organization been blessed? What was skill and what was luck? How has your organization drifted from your core principles and mission? What are the key indicators that you need to monitor? What are the "prophets of doom" saying about your organization? Are you tempted to pursue something or someone new to turn things around?
If you catch things in time, you can still reengineer and turn things around. It's possible to return to great.
For more reviews by Allen White: [...]
Copyright © 2010 by Allen White
2 of 2 people found the following review helpful
on May 2, 2010
When General Motors was on the cusp of failure late last year, it was my belief that we should go ahead and let the company fail. The risk-reward function of business, the philosophical underpinning of why people go into business, was at stake here. If we bailed out the company, we were merely rewarding the countless number of decisions that were made over the past 100 years by company executives and their union partners. The decision to price themselves out of the marketplace, the decision to continue building cars that people didn't want or that the marketplace couldn't support, and the inability to read the future and make adjustments were made by countless executives over the years, but with little consequences. Failure to grow and expand and make a profit one year was rewarded by outlandish executive pay and bonuses only a couple of years later when things seemed to have turned around. But, digging deeper, one may have found the five stages of failure that Jim Collins outlines in his latest book, How the Mighty Fall and Why Some Companies Never Give In (Harper Collins, 182 pages). Collins is well-known for his national bestsellers Good to Great and Built to Last and is known for backing up his books with a vast array of research and sound numbers. Collins can be found working at his management laboratory in Boulder, Colo. and holds degrees in business administration and mathematical sciences from Stanford University and honorary doctoral degrees from the University of Colorado and the Peter F. Drucker Graduate School of Management at Claremont Graduate University.
Very quickly, Collins jumps to a five-stage process of failure among the great companies and provides plenty of analysis and examples. Everyone from Motorola to Newell to Zenith is looked at, and we get a clue into why some of them failed while others succeeded, despite some pretty daunting odds.
The federal government came to the rescue of GM, along with a host of other financial institutions. We will argue for a generation of the value and worthiness of that rescue and whether it should have happened. Collins doesn't get into the proposition of whether failure of the biggest companies is a good idea or not; he does, however, deconstruct past failures and give us the warning posts to look for.
Collins' style is methodical and easy to read. I read this book in a weekend, and he laid it out very clearly. So, what are the five stages and what do they look like?
Stage 1: Hubris Born of Success. Great enterprises can be insulated by success. They succeed in spite of themselves, and they become arrogant with the idea that they cannot fail. Those looking at them from the outside see a company that has the "golden touch." Luck, chance and big gambles are part of this stage. Some companies stay with one great idea and never evolve.
They relish their Stage 1 successes and try to live off that greatness. Collins says these companies must take the company off autopilot and "exit definitively or renew obsessively, but do not ever neglect a primary flywheel." This means you have to be careful to recognize what got you to the dance. Once on the dance floor, it is ok to try new moves, but always remember that fundamental step you learned that first day of dance class. That step, that move, was how you got on the dance floor in the first place.
Stage 2: Undisciplined Pursuit of More. Hubris from stage 1 leads right into stage 2 - undisciplined pursuit of more and more. This is the opposite of complacency. The attitude is that we can do anything, and nothing can stop us, so let's pursue projects and ideas that we really have no business going after.
Companies can continue to grow without understanding the "why" of their growth - pursuit of more. That is the American birthright and, in fact, some would argue, institutionalized in the Constitution. Collins argues that companies that pursue for the sake of pursuing don't necessarily survive. It is one thing to set goals that one is going to grow and achieve, but then, that is merely activity. What is the quality of that growth, and is it sustainable? I have seen it myself working in municipalities and other organizations. Communities grow for the mere sake of growing. They continue to build without regard to whether the growth is sustainable and if the community can survive. Why? Because of the effects of Stage 1. "We are the best! No one can stop us because we are who we are."
Pursuit of growth isn't necessarily bad, according to Collins, but the "undisciplined" pursuit of growth can lead to major issues for longevity. Collins invokes Packard's Law, which states, "No company can consistently grow revenues faster than its ability to get enough of the right people to implement that growth and still become a great company." The law, named after David Packard, one of the founders of Hewlett-Packard, provides the ultimate guide in growth. Are the right people in the right seats? One person who advises me regarding our own organization asks the question this way, "Is everyone on the team an `A Player'?" If there are "B Players", you need to move them up to an A. If they are a "C Player," they need to think about leaving...and soon.
Stage 3: Denial of Risk and Peril. Although data is clear, it is explained ambiguously at best. Information is explained away as "cyclical," "temporary" or "not that bad." Bad news is spun to look at the positive. It seems no one wants to be responsible anymore. Constant denial launches companies into projects and programs that steer them headlong into Stage 4.
How many financial services companies and banks fell into this trap over the past several years? Buoyed by hubris (Stage 1) and undisciplined pursuit of more (Stage 2), big companies, the ones too big to fail, repeatedly ignored the signs of impending doom and failure. We have lived this during the recession of the past year, and it has not only hurt the companies, banks and financial institutions that practiced these poor habits, they took the entire economy down with them.
Stage 4: Grasping for Salvation. All the denial that occurred in Stage 3 has now manifested itself in Stage 4 where the weaknesses and failures of the company are visible to all. "Saviors" come into play here; someone who will come in and appear to save the day with a bold new strategy, product or concept, but ultimately fails. Initial results are positive, but don't really take.
Remember the stories about "Chainsaw Al" who was to come and save the day at Sunbeam? Well, after a few blustery years, his personality was overcome by reality. The company was doomed to fail even with the savior having just walked through the door. You see this in politics and public life, as well. It reminds me of the sheriff in Arizona who requires his inmates to wear pink jumpsuits and does all types of unconventional things in the pursuit of his job. Is it to make headlines? Or does it really mean something that will be sustainable and worthwhile in the end? Those who will deny what is really coming through the door, are there for short-term successes and not long-term sustainability.
Stage 5: Capitulation to Irrelevance or Death. All the fancy efforts tried in previous stages, particularly Stage 4, are tried again and, after a while, people are either demoralized or the saviors of the companies sell out and head for the door. The company either becomes insignificant or dies a spectacular death publicly.
You can't get out of Stage 5, but you can come crawling back from the depths of Stage 4. Some have done it. IBM is an example. Will car companies like GM and Chrysler do it?
I have to admit, I have never read Collins' other books, but I am familiar with his concepts and ideas. What I do know about his work is that it is well-researched and well-documented. This book ends after 123 pages, and pages 128 through 182 are appendices and notes to the text. Over 80 pages of strong documentation and examples of research are supporting his ideas.
In the end, Collins argues that we all need setbacks, but the great companies who are not practicing or manifesting the five stages of failure can deal with these setbacks and bounce back. We all know people who have had significant setbacks and come back to be as successful as before or more successful than ever. I'm sure many are waiting to see if Tiger Woods can become that person who came from total and colossal failure in his personal life (assuming all the tabloid articles are true), and be, once again, at the top of the golf world.
Collins himself outlines the abject failures of what most would consider one of the most successful people of the 20th century, Winston Churchill. His decisions and failures leading up to World War II were well-chronicled and he was at once vilified and disdained as one who could not lead. Yet, in the throes of crises he stood up against the Nazis and unified a country. Churchill's core legacy was to never give in, and he never did. He never gave in; he just changed tactics. That, according to Collins, is the key to survival and success. Failure is only in the eye of the beholder.
Now, what will it take to get you into that Impala today?
2 of 2 people found the following review helpful
on April 5, 2010
How the Mighty Fall is very fascinating book; the author Jim Collins wonderfully illustrated the stages of decline for institution. The book addressed some questions: How do the institutions fail? Can decline be detected and avoided? How far can an institution fall before it becomes inevitable doom? Can institutions reverse course? The title implied a depressing topic, I was fully expecting series of facts on demise of great companies but this book is rather uplifting. How the Mighty Fall not only illustrated the perils that management faced as well as all the pothole companies got into, the book also aimed to depict what is and how to be a great leader.
The book started off asking a very thought provoking question "is America renewing its greatness, or is America dangerously on the cusp of falling from great to good?" As author pointed out, every institute no matter how great is vulnerable to decline, there is no law of nature that the mighty will not fall, and ultimately anyone can and will fall. The author explained that great civilizations from the Egyptian, Greek, Roman and British, all fall eventually. Will American ever fall and how would we know? I really find it intriguing the author comparing an institutional decline as a staged disease, declines do not develop overnight, it develops in stages overtime. It can be "harder to detect but easier to cure in the early stages, easier to detect but harder to cure in the later stages." The author identified five continuous stages of institutional decline, from easy to cure Hubris to incurable death.
In Stage 1: Hubris Born of Success, companies can be plagued by arrogance that cannot accept criticism, which overconfidence guided the companies to think it can do no wrong; as the example of Motorola depicts, falling from 50% market share to 17% in just four years. Stage 2: Undisciplined Pursuit of More illustrated how hubris allows companies to chase enormous growth without adhere to its core values that made the company successful in the first place; the book described companies jumping into new ventures to increase earning or enlarge market shares without the foundation, expertise, experience or the right personnel and pays the price for its undisciplined pursuit. The author demonstrated brilliantly in the difference of Ames and Wal-Mart. Stage 3: Denial of Risk and Peril, building from stage two, companies simply ignore obvious problems and blame the outside world; many companies preferring to blame external forces such as the economy and trade policies instead of taking a close look at its competitiveness, cash flow and reserves; the Morton Thiokol and NASA's involvement in the space shuttle Challenger disaster demonstrates the author's point of "taking risks below the waterline." Stage 4: Grasping for Salvation illustrated the desperation companies' exhibit when it finally realized its perils; to bring about salvation by desperate means, often a "silver bullet" in form of the revolutionary changes, game changing innovations or a visionary leadership. Companies frequently organizing massive layoffs, corporate restructure, debt restructure and/or new CEOs, taking attention away from core business and leading to further decline. The author also point out that a few companies were able stage a comeback from this stage before falling to Stage 5: Capitulation to Irrelevance or Death. This stage is self-explanatory; like a final stage of disease, this is the last breath for the companies and there is no recovery, only remedy is bankruptcy, sell out or closure; the interesting facet of stage 5 is an institution can be profitable and bankrupt, they do not die from lack of earning, but they die from lack of cash.
"Decline can be avoided. Decline can be detected...decline can be reversed." The best aspect of the book is its positive messages; there are examples of turnaround by Xerox and IBM from Stage 4. I really enjoy the anecdote of good leadership, from Wal-Mart founder Sam Walton to IBM CEO Louis Gerstner. This book allow me a greater understanding of Wal-Mart, my previous impression of Wal-Mart were from the negatives press it received of late, but now I understand that its ultimate success attribute to its strategy and discipline pass down by its founder Sam Walton. Another interesting facet is how one company can succeed while the rival will faded to oblivion in the same economy; the book did an excellent job detailing how Best Buy, Wal-Mart and Xerox can prosper, while Circuit City, Ames, and Addressograph fail. After reading this book, I feel more hopeful of our current financial crisis, the author's message is clear; do not surrender to hubris, do not exceed your limit, there is no quick fixes, do not give up on your core value and do not be limited by circumstances.
In light of present events, we should all be motivated to understand the current financial crisis. There was too much ambition, too much risk, too much leverage, too much financial innovation, too much aggressive opportunism. Business leaders should conduct an assessment of their institutions in order to avoid another potential crisis for the future...more realistically the near future.